The second largest bank failure in our history might of been caused by fraudulent practices. From CNN:
A source said the federal government is looking into whether the bank engaged in fraud when it made home loans to high-risk borrowers.
The source said the investigation is focused primarily on the company, not individuals.
Meanwhile, Josh Hochberg, the former head of the U.S. Justice Department's fraud section, said that any investigation of Indymac would probably look into whether the bank used false information to give loans to people who wouldn't have otherwise been eligible.
I know for a fact that it was common for banks/lenders to boost customers income and other criteria in order to get the loan up to snuff here in Cali. I have observed it when I worked in account recovery and sent folks to refi their homes in order to pay off exorbitant debts like hospital bills or car loans they defaulted on.
The FBI has a full plate in this regard, investigating at least 21 other lending institutions for fraud according to the CNN writeup. As far as the customer accounts at Indymac the writeup has this:
About 95 percent of the $19 billion in deposits in Indymac bank are insured, but that leaves $1 billion that was not covered by Federal Deposit Insurance Corp. guarantees, according to CNNMoney. According to the FDIC, 10,000 IndyMac customers could lose as much as half of that amount, or $500 million.The agency says the failure will cost the Deposit Insurance Fund between $4 billion and $8 billion, based on preliminary estimates.
As Dave said in one of his comments here recently, and I quote:
Another great example of the Republican "capitalistic" ideal of privatizing profit and socializing loss.
Fuck wotta mess...
